corrigendum - oecd · corrigendum. please note that despite our best efforts to ensure quality...

Medium-Term Renewable Energy market Report 2015

DOI: http://dx.doi.org/10.1787/renewmar-2015-en ISBN 9789264243613 (print) ISBN 978-92-64-24367-5 (PDF) © OECD/IEA 2015

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Please note that despite our best efforts to ensure quality control, errors have slipped into the Medium-Term Renewable Energy market Report 2015

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Corrigendum: Medium-Term Renewable Energy market Report 2015

http://dx.doi.org/10.1787/renewmar-2015-en

ACKNOWLEDGEMENTS

ACKNOWLEDGEMENTS The Medium-Term Renewable Energy Market Report 2015 was prepared by the Renewable Energy Division of the International Energy Agency (IEA). The main authors of the report are Yasmina Abdelilah, Heymi Bahar, Karolina Daszkiewicz, Pharoah Le Feuvre and Michael Waldron, who led and co-ordinated the analysis. Simon Mueller authored the Feature Box on distributed solar PV with analysis by Emanuele Bianco and Zuzana Dobrotkova (consultant). Cédric Philibert authored the Feature Box on PV learning rates. Yasuhiro Sakuma authored the Feature Box on Japan electricity market reform and offshore development in Asia. Yanqiu Bi also provided valuable content input. Adam Brown provided important input on the renewable policy and technology analysis. Paolo Frankl, Head of the Renewable Energy Division, provided valuable guidance and input to this work, as did Keisuke Sadamori, Director of Energy Markets and Security.

This report has benefited from valuable administrative support provided by Michelle Adonis and Jane Berrington.

Other IEA colleagues who have also made important contributions to this work: Pierpaolo Cazzola and Marine Gorner authored the Feature Box on electric vehicles; Marco Baroni, David Bénazéraf, Stéphanie Bouckaert, Laura Cozzi, Dagmar Graczyk, Timur Guel, Veronica Gyuricza, Antoine Halff, Joerg Husar, Costanza Jacazio, Florian Kitt, Simone Landolina, Matthew Parry, Valerio Pilia, Roberta Quadrelli, Uwe Remme, Jesse Scott, Christopher Segar, Nora Selmet, Laszlo Varro, Brent Wanner, David Wilkinson, Matthew Wittenstein, Takuro Yamamoto and Georgios Zazias. Timely data from the IEA Energy Data Centre were fundamental to the report with particular assistance owed to Duncan Millard, Chief Statistician, and Pierre Boileau, Emmanouil Christinakis, Loïc Coent, Markus Fager-Pintila, Rémi Gigoux, Aidan Kennedy, Vladimir Kubecek, Roberta Quadrelli, and Gianluca Tonolo. OECD Environment Directorate colleagues Geraldine Ang and Olivier Durand-Lasserve also provided important comments.

This work benefited from extensive review and comments from the IEA Standing Group on Long-Term Co-operation, Renewable Energy Working Party, renewable energy Implementing Agreements, members of the Renewable Industry Advisory Board and experts from partner countries and other international institutions. The work also benefited from feedback by the IEA Committee on Energy Research and Technology.

In particular, thanks are due to the following organisations that provided important review comments or project inputs:

Abengoa Solar, Australia (Department of Industry), Acciona, Althesys, Austria (Austria Energy Agency and Federal Ministry of Science, Research and Economy), Belgium (Federal Public Service Economy), Belgium (Permanent Delegation of Belgium to the OECD), Berkeley Energy, Brazil (Centro de Pasquisas de Energia Eletrica and Ministry of Mines and Energy), Canada (Natural Resources Canada), Chile (Permanent Delegation of Chile to the OECD), China (Energy Research Institute/National Development and Reform Commission and China National Renewable Energy Centre), Citigroup Capital Markets, Inc., Dii, Dong Energy, EnerjiSA, E.ON Climate and Renewables, EDF, Egypt (Ministry of Electricity and Energy, New and Renewable Energy Authority), Eneco, Enel Green Power, European Commission (DG for Energy), European Bank for Reconstruction and

4 MEDIUM-TERM RENEWABLE ENERGY MARKET REPORT 2015

TABLE OF CONTENTS


LIST OF FIGURES

Figure 1 Renewable power net additions to capacity under main and accelerated cases ............... 18 Figure 2 The renewable policy journey and changing policy priorities ............................................. 22 Figure 3 OECD renewable electricity net capacity additions and projection (GW) .......................... 26 Figure 4 OECD renewable electricity generation and projection (TWh) ........................................... 27 Figure 5 OECD incremental renewable capacity additions, main versus accelerated case .............. 29 Figure 6 OECD Americas historical and forecasted net additions to renewable capacity, generation

and investment .................................................................................................................... 31 Figure 7 OECD Americas power demand versus GDP growth .......................................................... 32 Figure 8 OECD Americas incremental renewable capacity additions, main versus

accelerated case .................................................................................................................. 37 Figure 9 OECD Asia Oceania historical and forecasted capacity additions, generation

and investment .................................................................................................................... 43 Figure 10 OECD Asia Oceania countries power demand versus GDP growth ..................................... 44 Figure 11 OECD Asia Oceania renewable capacity additions, main versus accelerated case ............. 46 Figure 12 OECD Europe historical and forecasted capacity additions, generation and investment .. 55 Figure 13 OECD Europe countries power demand versus GDP growth .............................................. 55 Figure 14 OECD Europe incremental renewable capacity additions, main versus accelerated case . 59 Figure 15 Non-OECD renewable net electricity capacity additions and projection (GW) .................. 66 Figure 16 Non-OECD renewable electricity generation and projection (TWh) ................................... 67 Figure 17 Non-OECD incremental renewable capacity additions, main versus accelerated case ...... 68 Figure 18 Africa power demand versus GDP growth .......................................................................... 70 Figure 19 Africa historical and forecasted net additions to renewable capacity, generation

and investment .................................................................................................................... 71 Figure 20 SSA (including South Africa) new renewable generation versus power demand growth .. 75 Figure 21 Africa incremental renewable capacity additions, main versus accelerated case ............. 76 Figure 22 Non-OECD Asia countries power demand versus GDP growth ........................................... 91 Figure 23 Non-OECD Asia historical and forecasted capacity additions, generation and investment 92 Figure 24 Non-OECD Asia incremental renewable capacity additions, main versus

accelerated case .................................................................................................................. 95 Figure 25 Non-OECD Europe and Eurasia power demand versus GDP growth ................................ 105 Figure 26 Non-OECD Europe and Eurasia historical and forecasted capacity additions, generation

and investment .................................................................................................................. 108 Figure 27 Non-OECD Europe and Eurasia incremental renewable capacity additions, main

versus accelerated case ..................................................................................................... 110 Figure 28 Middle East historical and forecasted capacity additions, generation and investment ... 112 Figure 29 Middle East countries power demand versus GDP growth .............................................. 112 Figure 30 Middle East incremental renewable capacity additions, main versus accelerated case .. 114 Figure 31 Non-OECD Americas power demand versus GDP growth................................................. 115 Figure 32 Non-OECD Americas historical and forecasted capacity additions, generation and

investment ......................................................................................................................... 116 Figure 33 Non-OECD Americas incremental renewable capacity additions, main versus

accelerated case ................................................................................................................ 119 Figure 34 World net additions to renewable power capacity, historical and forecast (GW) ........... 125 Figure 35 World renewable generation and forecast (TWh) ............................................................ 126

TABLE OF CONTENTS

MEDIUM-TERM RENEWABLE ENERGY MARKET REPORT 2015 11

Figure D.7 Japan annual net additions to renewable capacity and new investment ........................ 48 Figure D.8 Japan electricity transmission system .............................................................................. 48 Figure D.9 Japan estimated solar PV LCOE ranges versus FiT and end-user price levels ................... 50 Figure D.10 Turkey renewable power capacity additions 2014-20 ..................................................... 60 Figure D.11 Turkey wind projectsremuneration choice ....................................................................... 60 Figure D.12 Turkey utility solar PV LCOEversus FiT .............................................................................. 60 Figure D.13 UK annual net additions to renewable capacity and new investment ............................. 62 Figure D.14 UK renewable power awarded under first CFD auction, February 2015.......................... 62 Figure D.15 South Africa’s historical and forecasted net additions to renewable capacity 2014-20 ...... 78 Figure D.16 Preferred bid prices from REIPPPPBid Windows (BWs) 1-4 ............................................. 78 Figure D.17 South Africa’s new renewable generation versus power demand growth ...................... 78 Figure D.18 South Africa’s transmission network ................................................................................ 80 Figure D.19 New solar PV net additions to capacity by segment ........................................................ 80 Figure D.20 SSA’s historical and forecasted net additions to renewable capacity 2014-20 ................ 82 Figure D.21 Hydropower capacity by region (2014-20) ....................................................................... 82 Figure D.23 Non-hydropower capacity additions by technology (2014-20) ........................................ 82 Figure D.24 Africa electrification per country ...................................................................................... 84 Figure D.25 Demand, electrification rate, and population (bubble size) ............................................. 84 Figure D.26 Electricity generation by source in SSA over 2000-13 (left) and in 2013 (right) .............. 86 Figure D.27 FiTs in select SSA markets ................................................................................................. 86 Figure D.28 Electrification rates versus targets ................................................................................... 86 Figure D.29 Sub-Saharan incremental renewable capacity additions, main versus

accelerated case ............................................................................................................... 88 Figure D.30 Renewable generation SSA (TWh) .................................................................................... 88 Figure D.31 Total RES-E versus demand in2013 and 2020 ................................................................... 88 Figure D.32 India annual net additions to renewable capacity and new investment ......................... 96 Figure D.33 Ten-year govt. bond interest rates ................................................................................... 96 Figure D.34 India LCOE of wind and PV vs power market price, new imported coal LCOE and RECs ........ 96 Figure D.35 Weighted average PPA bid prices in solar PV auctions, state and JNNSM, 2010-15........ 98 Figure D.36 Commercial power tariffs versus PV LCOEs and FiTs, selected states, 2014 .................... 98 Figure D.37 China annual net additions to renewable capacity and new investment ...................... 101 Figure D.38 China solar PV forecast capacity and deployment by market segment ......................... 103 Figure D.39 China incremental renewable capacity additions, main versus accelerated case ......... 103 Figure D.40 Brazil renewable power capacity additions 2014-20 ...................................................... 120 Figure D.41 Brazil power capacity auction results and prices ............................................................ 120

LIST OF TABLES

Table 1 Economic and technical lifetime assumptions in MTRMR 2015 (years) ................................ 23 Table 2 Central assumptions for global LCOE ranges by technology (beginning of 2015) ................. 24 Table 3 OECD Americas countries main targets and support policies for renewable electricity ....... 33 Table 4 OECD Americas main drivers and challenges to renewable energy deployment ................. 34 Table 5 OECD Americas cumulative renewable energy capacity in 2014 and 2020 .......................... 35 Table 6 Asia Oceania countries main targets and support policies for renewable electricity ........... 44 Table 7 OECD Asia Oceania, selected countries renewable energy capacity in 2014 and 2020 ........ 45 Table 8 OECD Asia Oceania main drivers and challenges to renewable energy deployment ............ 46

RENEWABLE ELECTRICITY: OECD


Figure 5 OECD incremental renewable capacity additions, main versus accelerated case

0 50 100 150 200 250 300 350

Total

Other

Solar PV

Wind

Capacity growth 2014-20 (GW)

Main case

Acceleratedcase

OECD Americas Recent trends In the OECD Americas, renewable power generation increased by more than 2% in 2014 over 2013 to reach near 1 060 TWh. Although the United States and Canada continue to dominate the overall statistics, their growth masks important changes emerging in Mexico and Chile. Renewables represented around 20% of regional power generation in 2014, slightly higher than in 2013. Meanwhile, the share of fossil fuel generation slightly decreased from 63% to 62%.

In the United States, renewables represented over 13% of power generation in 2014, up from less than 12% in 2013. Renewable capacity additions increased from 8 GW in 2013 to 11.7 GW in 2014 as new land-based wind (onshore wind) installations recovered from a very weak 2013 and solar PV growth was strong.

In mid-December 2014, the federal production tax credit (PTC) for new projects was extended only through the end of 2014. For new projects, this extension gave wind developers only two to three weeks to start construction in order to qualify. Accordingly, developers should commission their projects by 1 January 2017 in order to qualify for the PTC. Although the Obama Administration has proposed the permanent extension of the PTC and investment tax credit (ITC) as part of the 2016 budget, this is only an initial step towards the budget discussions in the congress, which will start in October 2015.

Despite uncertainty over last-minute renewal of the PTC, onshore wind additions picked up with close to 5 GW of wind capacity coming on line in 2014, significantly higher than 0.9 GW commissioned in 2013. Still, it is expected that more than 12 GW of wind projects are qualified for PTC as they started their construction in 2013-14. The largest additions came from Texas (1.75 GW) followed by Oklahoma, Iowa and Colorado. Overall, onshore wind generation increased by around 8.5% in 2014, reaching 184 TWh, accounting for over 4% of the power mix.

Backed by the ITC and state-level incentives for net metering, solar PV new additions increased to over 6 GW in 2014 versus 4.8 GW in 2013. Solar PV capacity reached over 18.7 GW by the end of 2014, generating over 22 TWh, 54% higher than in 2013. Still, solar PV represented less than 1% of power generation in the United States. California alone installed more than 55% of new capacity, followed by North Carolina, Nevada, Massachusetts and Arizona. Additions in the top



locations. Under these conditions, both onshore wind and solar PV cumulative capacity could be

300 MW to 500 MW higher in 2020.

Figure 8 OECD Americas incremental renewable capacity additions, main versus accelerated case

0 20 40 60 80 100 120 140

Total

Other

Solar PV

Wind


Main case

Acceleratedcase

RENEWABLE ELECTRICITY : OECD


United States dashboard

Figure D.1 Annual net additions to renewable capacity (2013-20)

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Bioenergy

Hydropower

Source: Historical OECD capacity derived from IEA (2015a), “OECD - Net capacity of renewables”, IEA Renewables Information Statistics (database).

Figure D.2 EPA’s CPP summary for selected states

0 10 20 30 40 50 60 70 80 90

California

Texas

Indiana

New York

Illinos

Oklahoma

Alabama

Florida

Generation (TWh)

Renewablegeneration in2012

EPA proposedrenewable energytarget in 2020

Coal to gasredispatch by2030

Source: EPA (2014), Clean Power Plan proposed rule.

Figure D.3 US wind versus gas, estimated LCOEs Figure D.4 PJM coal plant retirements

Note: For CCGT and OCGT, fuel cost assumption is USD 2.85/MMbtu (May 2015 Henry Hub Spot Price) in 2015 and USD 6.2/MMbtu in 2020 (IEA [2015c], Projecting Costs of Generating Electricity 2015 Edition), discount rate 7%, capacity factor 65% and 15% (OCGT). For wind, typical utilisation rate is 30-36%, 50% utilisation is observed in the interior region.

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Source: PJM (2015), “Future deactivations as of June 29, 2015”.

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their potential impacts are mostly made in the broad sense. Under the accelerated case, renewable capacity growth over 2014-20 could be almost 30% higher versus the main case.

At the regional level, increasing the level of interconnection across Europe is probably the most significant step that could improve the value of renewable generation and facilitate development of a more effective pan-European renewable system, though this development would take place over the medium to long term (IEA, 2014). Financing such investment should be a priority within EU structural funding and in the activities of the European Investment Bank (EIB). Still, other challenges related to the permitting and local acceptance of new grid infrastructure would also need to be addressed in a number of markets, including Germany and the United Kingdom. Timely clarification of a credible mechanism to spur states to comply with a new EU-28 2030 renewable target could also help enhance investor certainty and spur new investment in both renewables and grid infrastructure. The development of indicative benchmarks that broke down the 27% renewables target at the member state level, accompanied by co-ordinated approaches to grid and renewable generation planning among groups of countries, could facilitate this transition (Held et al., 2014).

Figure 14 OECD Europe incremental renewable capacity additions, main versus accelerated case

0 20 40 60 80 100 120 140

Total

Other

Solar PV

Wind


Main case

Acceleratedcase

In the dynamic power systems of the region, countries would need to further reduce non-economic barriers to development. Notably, in Turkey, solar PV deployment could be higher with streamlined permitting procedures, clear net metering rules and the acceleration of further capacity auctions for utility-scale capacity. In more stable power systems facing significant electricity sector transitions, some policy uncertainties persist. A clarification by governments of wide-ranging reforms ahead, potential future revisions to support schemes (e.g. the United Kingdom), the pace and transitional measures related to future auctions for new generation (e.g. Germany), and regulatory questions over distributed generation and the allocation of fixed network costs (e.g. Belgium, France, Spain) could enhance investor certainty. Power systems with clear overcapacity and reduced prospects for new renewable deployment need to avoid retroactive measures on existing generators.

Greater-than-expected development of grid connections, transmission capacity, interconnections, other forms of flexibility (such as storage) and improved grid codes and operations would be needed for the timely scale-up of wind power, with further cost reductions required for offshore wind in particular. The easing of some non-economic barriers to deployment in some countries should also support further deployment. Faster-than-expected cost reductions could also drive an acceleration of distributed solar PV for self-consumption under conditions of socket parity. Lastly, greater progress in the establishment of sustainable feedstock supply chains could raise the outlook for bioenergy.

RENEWABLE ELECTRICITY: NON-OECD


• In India, ambitious new government targets and an improved policy environment suggestrenewable growth could accelerate there. Total renewable capacity growth, at over 65 GW (+85%)from 2014-20, is some 35% higher than in MTRMR 2014, due to onshore wind and solar PV. Thereinstatement of key financial incentives from the central government are catalysing new winddevelopment, but the stability of these measures, which had been subject to stop-and-go policymaking, will be key for consistent development. Meanwhile, competitive state- and central-government-level auctions are driving more cost-effective utility-scale solar PV development, ascontracted prices have fallen over the past two years. Still, the upgrade and expansion of the grid;off take risks for generation, given the cash-strapped position of some state electricity boards; andthe cost and availability of financing represent challenges. In all, India is estimated to requireinvestment of more than USD 80 billion for new renewable capacity during the forecast period.

• Renewable development accelerates in other regions, though with significant differences. Thenon-OECD Americas and Asia, outside of China and India, are the largest contributors. In theAmericas, with a high penetration of hydropower, severe droughts and limited infrastructure forscaling gas generation suggest non-hydro renewables will play an important diversification role,supported by the award of long-term contracts to wind, solar PV, STE and bioenergy capacityunder competitive auctions in a number of markets. In Asia, strong demand growth anddiversification needs support a robust expansion of hydropower, complemented by a portfolio ofnon-hydro sources. In Africa, acute demand needs, excellent resources and supportive policyframeworks should support continued hydropower expansion and an acceleration of non-hydrodeployment in some countries (e.g. Morocco, Egypt, South Africa). Still, the pace of government-backed tender schemes and grid and financing constraints represent challenges. In the MiddleEast, despite excellent resources, persistent regulatory barriers and uneven implementation ofrenewable support policies have hampered development. Yet some renewables are beingdeveloped at very low costs in several countries, supported by market frameworks of competitionover long-term contracts. Meanwhile, renewable development remains relatively weak in non-OECD Europe and Eurasia, where abrupt policy changes have contributed to past boom-and-bustcycles in several markets, and policy implementation remains only nascent in others.

Figure 17 Non-OECD incremental renewable capacity additions, main versus accelerated case

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Solar PV

Wind


Main case

Acceleratedcase

• Under this report’s accelerated case – which is market-specific to each region – renewablegrowth could be 25% higher over 2014-20 than under the main case. In addition to faster-than-



Medium-term outlook – accelerated case summary Renewable capacity in Africa could be 30% higher by 2020 with increased speed of government action in moving through national plans for state-led projects, clarifying regulations and de-risking climates to attract private investment. There are a number of robust project pipelines in many countries emerging from ambitious plans, sowing the seeds of growth, yet the rate at which the capacity can reach financial close, begin construction and materialise into generating capacity remains the largest uncertainty to the forecast. Rapid and steady progression through the implementation of various procurement programmes and reduced technical or non-economic barriers would encourage higher growth. Improved access and cost of financing and planning necessary grid upgrades to accommodate new capacity in lockstep with support schemes could also unlock faster rates of deployment.

In South Africa, faster progress in grid maintenance is needed to connect additional capacity under the REIPPPP, and improved co-ordination during project selection in future bidding rounds could add 1-2 GW more of renewable capacity by 2020. Deployment could further increase should regulatory decisions increase electricity prices, carbon tax implementation and revised 2030 targets from an updated Integrated Resource Plan improve the economic attractiveness and support environment for renewables.

Egypt’s capacity could be 2-4 GW higher by 2020 depending on the rate at which the country implements plans for additional capacity under the various procurement mechanisms. Faster annual deployment of solar PV and wind capacity under the FiT scheme could be seen if no major obstacles or grid delays are met during the implementation of the new programme. Clarification on contractual processes and associated grid connection and land leasing costs that would allow developers to assess project bankability early on could attract the additional wind capacity needed to meet the scheme’s 2 GW target. Faster progress through the BOO auction scheme for large capacities without the delays the scheme initially experienced would add considerable capacity annually.

Figure 21 Africa incremental renewable capacity additions, main versus accelerated case

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Hydropwer

Other

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AcceleratedCase

Outside of the FiT, roughly 4 GW of wind capacity from public and private projects are at various stages. Bringing the more developed projects into operation by 2020 might require additional grid upgrades and overcoming non-economic administrative barriers. Under these circumstances, wind could be 1-2 GW higher by 2020. Greater uncertainty surrounds the upper limit of potential of solar PV deployment. The FiT targets 2.3 GW and the government reportedly signed several MoUs with



South Africa dashboard

Figure D.15 South Africa annual net additions to renewable capacity (2013-20)

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Figure D.16 Preferred bid prices from REIPPPP Bid Windows (BWs) 1-4

Figure D.17 South Africa’s new renewable generation versus power demand growth

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Note: OCGT = open-cycle gas turbine. *Average as reported in DoE (2015a), Renewable Energy IPP Procurement Programme, Bid Window 4, Preferred Bidders’ Announcement.

Notes: Historical power demand from IEA (2015a). Growth over 2008-14 = 0.

Table D.7 South Africa renewable energy capacity (GW)

2014 2016 2018 2020 2020*

Hydropower 2.3 3.3 3.6 3.6 3.8 Bioenergy 0.3 0.3 0.3 0.4 0.8

Onshore wind 0.6 1.5 2.5 3.3 4.0 Offshore wind Solar PV 1.0 1.5 2.4 3.3 4.4 STE/CSP 0.2 0.5 0.7 0.9 Geothermal Ocean

Total 4.1 6.8 9.4 11.4 13.8

* Accelerated

• Drivers- urgent need for new capacity andexcellent resource potential- supportive policy environment withcompetitive auctions and long term PPAs- good economic attractiveness- rising power prices.

• Challenges- grid integration of variable renewables- long-term uncertainty in power sectorplans- financial sustainability of power utility.

94%

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% RES-E of demandgrowth

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likely influenced by constrained supply.



Other SSA dashboard

Figure D.20 SSA annual net additions to renewable capacity (2013-20)

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Figure D.21 Hydropower capacity by region (2014-20)

Figure D.23 Non-hydropower capacity additions by technology (2014-20)

Other SSAEthiopiaAngola

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Table D.9 Sub-Saharan Africa renewable energy capacity (2014-20)

2014 2016 2018 2020 2020*

Hydropower 20.6 23.0 26.6 30.0 35.8

Bioenergy 1.0 1.1 1.2 1.3 2.0

Onshore wind 0.3 0.4 0.7 1.3 2.5

Offshore wind

Solar PV 0.3 0.8 1.5 2.3 3.7

STE/CSP

Geothermal 0.6 0.6 0.8 1.0 1.5

Ocean

Total 22.7 25.8 30.8 35.9 45.5

* Accelerated

• Drivers- rapid rising power demand, diversification needs and excellent resources - emerging portfolio of policy frameworks - cost-effective power in certain conditions - electrification by distributed technologies.

• Challenges- high upfront costs and financing, subsidised prices - grid integration and interconnection - policy uncertianties, regulatory barriers - financial credibity of off takers, currency risk.



Other SSA

Figure D.29 Sub-Saharan incremental renewable capacity additions, main versus accelerated case

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AcceleratedCase

Table D.11 Sub-Saharan selected countries renewable energy capacity 2014-20

2014 2020 2020 (Accelerated case)

Ethiopia Kenya Nigeria Ghana Ethiopia Kenya Nigeria Ghana Ethiopia Kenya Nigeria Ghana

Hydropower 2.0 0.8 2.0 1.6 4.3 0.8 2.3 1.7 8.2 1.1 3.8 1.8

Bioenergy 0.2 0.0 0.0 0.0 0.2 0.1 0.0 0.0 0.5 0.3 0.1 0.1

Onshore wind 0.2 0.0 0.0 0.5 0.4 0.1 0.2 1.1 0.6 0.3 0.4

Solar PV 0.0 0.0 0.0 0.3 0.1 0.0 0.3 0.4 0.3 0.9 0.5

Geothermal 0.0 0.6 0.1 0.9 0.3 1.2

Total (GW) 2.3 1.5 2.0 1.6 5.4 2.4 2.4 2.2 10.5 3.6 5.0 2.8

Note: Totals may not sum due to rounding.

Figure D.30 Renewable generation SSA (TWh) Figure D.31 Total RES-E versus demand in 2013 and 2020

020406080

100120140160180

2012 2013 2014 2015 2016 2017 2018 2019 2020

Generat

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Wh)

Hydropower Geothermal Bioenergy Onshore wind PV

41%

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Note: RES-E = renewable electricity generation.

Source: Historical renewable electricity generation and demand from IEA (2015a), “World energy statistics”, IEA World Energy Statistics and Balances (database).



Figure 27 Non-OECD Europe and Eurasia incremental renewable capacity additions, main versus accelerated case

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Middle East Recent trends

Renewables are currently a small source of generation in the Middle East. Despite excellent resources for some technologies, persistent regulatory barriers in the power sector and uneven implementation of renewable support policies have hampered development. In 2013, total renewable power in the Middle East was 25 TWh, less than 3% of total power generation. Overall, renewable capacity additions were small in 2014, with the commissioning of the 320 MW Seymareh dam in Iran and some distributed solar PV in Jordan as the most notable developments. Still, significant renewable investment and project pipelines have emerged in several countries, supported by the advent of policy frameworks offering long-term contracts for large-scale renewables, some progress in opening markets to distributed generation, and increasingly attractive project economics versus other sources of new generation.

In Jordan, cumulative solar PV capacity rose to near 14 MW, with residential and commercial-scale projects being added under the country’s net energy metering scheme, which was introduced in 2012. Though no new large-scale capacity came on line, 200 MW of utility-scale solar PV projects and the 117 MW Talifa wind farm signed PPAs under the country’s direct proposal submission scheme, which, in the first round, offered attractive FiTs (USD 150-170/MWh for solar PV; USD 120/MWh for wind) (RCREEE, 2015). A second round was launched to tender 200 MW solar PV under a competitive bidding mechanism, with the four chosen bids reportedly ranging from much lower values: USD 61-77/MWh (Tsagas, 2015). No announcement to date has been made for further wind auctions, with grid integration concerns reportedly slowing development (Collins, 2015).

In the United Arab Emirates, renewable capacity remained steady in 2014, though generation rose with a full year of output from the 100 MW Shams 1 STE parabolic trough plant and the first phase (13 MW) of Dubai’s Mohammed Bin Rashid Al Maktoum Solar Park. In early 2015, the second phase (200 MW) was tendered for commissioning in 2017. The preferred bidder signed a 25-year PPA at USD 58.4/MWh – to date, the lowest contracted solar PV price observed globally. Aside from the long-term certainty provided by the PPA and the price competition from the auction, the bid benefited from excellent resources; reportedly attractive debt financing terms; a sizeable

RENEWABLE TRANSPORT


RENEWABLE TRANSPORT Summary • Global growth in biofuels production was achieved in 2014 despite a challenging environment.

Modest global expansion was underpinned by favourable feedstock crops in key markets such asthe United States (US) and the European Union (EU), new and increased biofuel mandates inseveral countries, and emerging Southeast Asian biofuel production markets establishing newexport relationships. The total production forecast for 2020 of 144 billion litres (L) is a slightupward revision from the Medium-Term Renewable Energy Market Report 2014 (MTRMR 2014).

• Mixed fortunes in the market-leading US and Brazilian biofuels industries. In the United States,ethanol production increased in 2014, aided by a bumper corn crop improving ethanol productioneconomics. The biodiesel industry contracted slightly, however, partly as a result of uncertaintyregarding the availability of blending subsidies. Brazil registered low-level growth in ethanolproduction despite squeezed profit margins from higher production costs and competition fromlow, regulated gasoline prices. Prospects for 2015 are improved by an increase in the taxation ofgasoline and also the anhydrous ethanol blending mandate rising to 27%. Brazil’s biodieselindustry also received a boost from an increase in the blending mandate to 7%.

• Biofuels policy uncertainty has reduced, but announcements provide mixed messages to keybiofuels markets. In the United States, with the exception of biodiesel, the Renewable Fuel Standard(RFS2) volumes announced by the US Environmental Protection Agency (EPA) propose reductions onprevious statutory targets for transport biofuels. However, if achieved, the volumes proposed wouldstill represent growth in renewable transport fuel consumption. Markets in member countries of theOrganisation for Economic Co-operation and Development’s (OECD) Europe region will be impactedby the decision to introduce a 7 percentage point (pp) cap on the contribution of conventional biofuelstowards the EU 10% renewable energy in transport target for 2020. While this has provided much-needed clarity to the European biofuels industry on the prospects for medium-term production, thedecision may dampen future investment prospects for conventional biofuels production capacity.

• Significant impacts from the reduction in crude oil prices on biofuel production at a global levelwere not observed during 2014. This was principally due to blending mandates protectingdemand. However, the consequential impacts of a sustained period of low oil prices on blendingeconomics, opportunities for discretionary blending above mandates and, in the case of Brazil, theprice of ethanol compared with gasoline at the pump could undermine markets for conventionalbiofuels and cause a downward shift from the MTRMR 2015 medium-term forecast.

• A significant increase in advanced biofuels production capacity was achieved in 2014, with fivenew commercial-scale plants commissioned, and a further two opening in 2015. The advancedbiofuels industry is now at a crucial stage, with prospects for future expansion linked to thetechnical and financial performance of these pioneering plants. The US EPA’s RFS2 volumes forcellulosic ethanol propose a decrease from statutory levels but still allow headroom for significantproduction increases. In the European Union, the cap on the contribution of conventional biofuelstowards the 2020 target for renewable energy in transport has created an opportunity foradvanced biofuel production to make an increased contribution to meeting this.

RENEWABLE TRANSPORT


Figure 82 World biofuels production 2008-20

Sources: IEA (2015c) Monthly Oil Data Service (database); MAPA (Ministério da Agricultura, Pecuária e Abastecimento), Ministério da Agricultura – Agroenergia; US EIA, Petroleum & Other Liquids.

Global overview Favourable policies and conditions limit the impact of reduced oil prices Today biofuels provide 4% of world road transport fuel, and are expected to rise slowly, reaching almost 4.3% in 2020. The global context for biofuels is changing as a result of the significant reduction in crude oil prices observed in 2014. However, this had only a limited effect on 2014 production as biofuel consumption remains largely mandate-driven. Production volumes reached 127 billion L in 2014, up from almost 118 billion L in 2013. Despite lower oil prices, world biofuels production is still forecasted to rise in the medium term to almost 144.5 billion L.

Table 39 World biofuels production 2014-20

Note: CAAGR = compound average annual growth rate.

Sources: IEA (2015c) Monthly Oil Data Service (database); MAPA, Ministério da Agricultura – Agroenergia; US EIA, Petroleum & Other Liquids data sources.

Billion L 2014 2015 2016 2017 2018 2019 2020 CAGR

OECD Americas 61.0 62.8 63.2 62.0 61.4 61.4 61.3 0.1%

United States 58.9 60.6 61.1 59.9 59.6 59.6 59.7 0.2%

OECD Europe 16.3 16.9 17.7 18.1 18.6 18.8 19.5 3.1% 0.8 1.0 0.8 0.8 0.8 0.8 0.8 -0.3%OECD Asia Oceania

Total OECD 78.1 80.5 81.8 80.9 80.8 81.0 81.6 0.8%

0.22 0.2 0.2 0.2 0.2 0.2 0.3 2%

2.66 0.8 3.0 3.2 3.2 3.4 3.5 6%

8.2 9.0 10.1 10.9 11.6 12.1 12.5 7%

Non-OECD Europe China Non-OECD Asia Non-OECD Americas 37.2 42.2 42.8 43.6 43.9 44.2 44.5 3%

Brazil 32.1 36.7 37.0 37.6 37.6 37.8 37.9 3%

Middle East 0.1 0.1 0.1 0.1 0.1 0.1 0.1 11%

0.5 0.8 1.0 1.1 1.3 1.3 1.5 19%Africa Total non-OECD 49.0 55.4 57.4 59.3 60.7 61.7 62.8 4%

Total world 127.1 135.9 139.2 140.2 141.5 142.7 144.4 2%

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World biofuels, energy-adjustedAs % of global road transport fuel demand

RENEWABLE TRANSPORT


World biofuel output in 2014 equated to approximately 92 billion L of conventional gasoline and diesel fuels, with an estimated associated wholesale value of USD 67 billion. This is forecasted to increase to 105 billion L by 2020 with a corresponding value of USD 74.5 billion. The cumulative 2014-20 value of conventional transport fuels offset by biofuels is forecasted at USD 500 billion.1

Table 40 Global main targets and support policies for liquid biofuels

Targets and quotas Support scheme Other support/specific requirements

Regulatory frameworks: EU Renewable Energy Directive (RED): 10% renewable energy in transport by 2020, with a 7 pp cap on conventional biofuels. US RFS2: renewable volume obligations for different categories of biofuels. Canada: Federal renewable fuel standard blending mandates for biofuels. Key producer biofuel mandates and targets: Country Biodiesel Ethanol United States

36 billion gallons of biofuels by 2022

Brazil 7% 27%

European Union

10% renewable energy in transport

by 2020 Argentina 10% 10% China* 10% Canada** 2% 5% Indonesia 15% 3% Thailand 7% Colombia 10% 8-10%India 10%Malaysia 7% Philippines 2% 10%

Tax incentives on retail sales of ethanol: Argentina, Australia, Austria, Bulgaria, Brazil, Czech Republic, Denmark, France, Finland, Germany (only ethanol exceeding quota and E85), Hungary, Ireland, Latvia, Lithuania, Luxembourg, Malta, Romania, Slovak Republic, Slovenia, Spain, Sweden, Japan, Korea, New Zealand, Thailand, United States (certain states). Tax incentives on retail sales of biodiesel: Argentina, Australia, Canada (Quebec, Nova Scotia), Austria, Belgium, Bulgaria, Czech Republic (different exemptions depending on blend %), Denmark, France, Hungary, Ireland, India, Latvia, Lithuania, Romania, Slovak Republic (certain blends), Spain, Sweden, Korea, Thailand, United States (certain states). Tax credits: US: tax credit for cellulosic ethanol and other qualifying advanced biofuels. Production-linked payments: Canada.

Sustainability requirements for biofuels: European Union: all biofuels used to meet RED 2020 target must comply with defined sustainability criteria. This includes GHG reductions and criteria relating to land where biofuels are sourced. Switzerland: tax exemptions for renewable fuels meeting environmental and social standards. United States: specific life-cycle emissions reduction standards under RFS2. Incentives for infrastructure development: Some EU member states have grant programmes for biofuels distribution infrastructure. USDA funding for E15 and E85 fuel distribution infrastructure. Sweden: large retail fuel stations must sell fuel from renewable sources. Thailand: retail stations selling E20 receive financial premium. RD&D programmes: European Union: funding available through NER 300, Horizon 2020. A number of countries provide RD&D for the development of advanced biofuels, biofuel feedstocks and supply chains.

*in some provinces; **federal: higher mandated blends in some provinces.

Notes: GHG = greenhouse gas; USDA = US Department of Agriculture; RD&D = research, development and demonstration. E15/E20/E85 refer to the ethanol percentage, with the remainder being gasoline, i.e. E15 = blend of 15% ethanol and 85% gasoline; B100 = pure biodiesel. For further information, refer to IEA Policies and Measures Database: www.iea.org/policiesandmeasures/renewableenergy.

Sources: Bahar et al.(2013), “Domestic incentive measures for renewable energy with possible trade implications”, OECD Trade and Environment Working Papers, No. 2013/01.

With gasoline and diesel prices reducing in line with crude oil from mid-2014, biofuels could become less competitive when compared with conventional fuels in certain markets. While this new price

1 IEA analysis based on energy-adjusted volume figures and average 2014 wholesale prices for gasoline and diesel in global markets from IEA IEA (2015c) Monthly Oil Data Service (database). USD values for 2020 and medium term (2014-20) were calculated using average 2014 prices.

RENEWABLE TRANSPORT


hydrous ethanol and flex-fuel vehicles account for more than 55% of the total light vehicle fleet, and the market share of these vehicles has the potential to reach over 80% by 2020 (USDA, 2014).

Ethanol production in Brazil increased only modestly by 1.25 billion L year-on-year in 2014. Production was affected by a period of drought in early 2014 resulting in a smaller cane harvest than previous years, which raised sugar cane prices and consequently ethanol production feedstock costs. This was partially alleviated, however, by reduced world sugar prices, which drove many sugar cane mills to shift more of their output towards ethanol.

A boost for the industry was received from the increase in the nationwide blending mandate from 25% to 27% in March 2015. In addition to the increase in domestic ethanol demand, the higher mandate offers producers the opportunity to sell more anhydrous ethanol, used for blending, which sells at a premium compared with hydrous ethanol, which is used unblended. Since there is limited scope to increase the sugar cane harvest substantially, any significant increase in domestic demand in the medium term, e.g. stimulated through even higher blending mandates or favourable national or state level taxation, may need to be satisfied by reduced sugar production, lower ethanol exports or higher imports. Ethanol exports to the United States may be affected by the proposed RFS2 advanced biofuel target adjustment. Sugar cane ethanol is eligible to count against the advanced biofuel target due to its lower GHG intensity compared with corn-based ethanol.

In 2014, many mills continued to struggle due to low profits from the production of both sugar and ethanol. In the case of the latter, ethanol producer margins were squeezed by the combination of increasing production costs and regulated government gasoline prices aimed at controlling inflation levels. However, in February 2015 Brazil raised taxes on gasoline and diesel. This increased retail prices for these fuels and allowed ethanol producers to raise prices that were previously effectively capped by regulated gasoline prices, allowing for increased ethanol production profits (Platts, 2014).

Due to its lower energy content when ethanol prices are generally more than 70% of the gasoline prices, flex-fuel vehicle consumers favour gasoline. The increase in taxation for gasoline has raised its retail price and stimulated consumer switching to ethanol. As a result of this change hydrous ethanol has been at its most price competitive level compared with gasoline since 2010 and between January and June 2015 consumption was 41% higher than over the same period in 2014 (Platts, 2015b), with the sugar cane industry producing more ethanol at the expense of sugar.

Despite these positive developments, the overall context for the industry remains challenging. In addition to approximately 70 plants that have stopped production on a temporary or permanent basis since 2008 (F.O. Licht, 2014), the Brazilian sugar cane industry association Unica has indicated that up to ten more mills may suspend operations in 2015-16 due to challenging economic conditions.

The Brazilian biodiesel outlook is more upbeat as a result of the increase in the domestic blending requirement from 5% to 7%. This has brought the mandate more in line with available biodiesel production capacity and should lead to a 0.6 billion L year-on-year increase in biodiesel production in 2015, reaching around 4 billion L. Over the medium term, production volumes are forecasted to increase to 4.7 billion L, driven primarily by an increase in diesel demand.

TABLES


Table 48 Total renewable electricity generation (TWh)

2014 2015 2016 2017 2018 2019 2020 CAAGR 2014-20

World 5423 5700 6028 6316 6596 6877 7156 4.7% OECD Total 2416 2569 2676 2770 2856 2946 3038 3.9%

OECD Americas 1057 1121 1169 1211 1240 1271 1308 3.6% Canada 396 417 423 430 438 443 449 2.1% Chile 32 37 39 44 48 53 56 10.1% Mexico 52 51 56 60 63 66 71 5.2% USA 577 617 652 677 691 709 732 4.1%

OECD Asia Oceania 238 254 271 287 301 315 328 5.4% Australia 37 34 36 39 42 45 48 4.4% Israel* 1 2 2 3 4 5 6 37.2% Japan 154 169 182 193 202 209 215 5.8% Korea 12 14 15 17 19 21 22 10.7% New Zealand 34 34 35 35 35 36 36 0.8%

OECD Europe 1121 1194 1235 1273 1315 1359 1402 3.8% Austria 54 55 56 57 57 59 60 1.8% Belgium 14 15 15 17 19 21 23 9.0% Czech Republic 10 10 10 10 10 10 10 0.2% Denmark 18 21 22 24 26 27 29 8.1% Estonia 1 3 3 3 3 3 3 15.2% Finland 26 28 28 29 31 32 32 3.8% France 95 98 101 103 106 111 115 3.2% Germany 166 196 206 214 223 232 242 6.5% Greece 12 14 15 15 15 15 15 4.0% Hungary 3 3 3 3 3 4 4 2.7% Iceland 18 19 19 19 19 19 19 1.2% Ireland 7 7 8 9 11 12 14 13.0% Italy 120 114 116 117 118 119 120 0.0% Luxembourg 1 1 1 1 1 1 2 0.7% Netherlands 12 13 14 15 17 19 21 10.6% Norway 139 139 140 141 143 143 144 0.6% Poland 20 23 25 26 27 29 31 7.1% Portugal 32 30 31 32 33 33 34 0.6% Slovak Republic 6 6 6 6 6 6 7 1.7% Slovenia 7 6 6 6 6 6 6 -1.0%Spain 114 105 105 105 106 106 106 -1.2%Sweden 85 94 96 98 99 101 103 3.4%Switzerland 42 41 42 43 44 45 46 1.5%Turkey 52 84 90 96 102 108 113 13.8%United Kingdom 67 71 77 82 89 96 103 7.4%

Non-OECD Total 3008 3131 3352 3546 3740 3931 4118 5.4% Africa 132 139 148 163 180 196 213 8.3%

Other sub-Saharan Africa 105 108 114 124 134 144 155 6.8% South Africa 7 9 12 16 19 21 23 23.0%

Asia (excluding China) 449 483 518 565 612 654 692 7.5% India 207 229 250 276 305 330 351 9.2%

China Region 1321 1393 1502 1594 1683 1776 1872 6.0% Europe and Eurasia 343 349 353 357 361 365 368 1.2% Non-OECD Americas 739 744 805 841 876 909 939 4.1%

Brazil 425 421 474 502 528 554 576 5.2% Middle East 24 24 25 26 29 31 35 6.7%

Notes: TWh = terawatt hour. Renewable electricity generation includes generation from bioenergy, hydropower (including pumped storage), onshore and offshore wind, solar PV, solar CSP, geothermal, and ocean technologies. For OECD member countries, 2014 generation data are based on IEA statistics published in Renewables Information 2015.

* The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This publication reflects the views of the International Energy Agency (IEA) Secretariat but does not necessarily reflect those of individual IEA member countries. The IEA makes no representation or

warranty, express or implied, in respect to the publication’s contents (including its completeness or accuracy) and shall not be responsible for any use of, or reliance on, the publication.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of

any territory, city or area.

The paper used has been produced respecting ecological, social and ethical standards.

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